Location, location, location

Commentary: Real estate has never been hotter in New York

Dr.Irwin Kellner

HEMPSTEAD, N.Y. (MarketWatch) -- This week's figures on new and existing home sales are not representative of the housing market as a whole.

Once you dig below the surface, you'll find that both sales and prices of residences in some parts of the country are actually going through the roof.

The dividing line between cold and hot is more complex than you might think. It's not always single-family homes vs. apartments, rentals vs. condos and coops, or specific regions, like the Southeast vs. the Midwest.

For that matter, it's not even central cities vs. suburbs. As the old real estate axiom goes, it all depends on location, location, location.

Nevertheless, if one had to generalize, one could say that the weakness in sales of both new and existing homes is most apparent along both coasts.

In the East, it ranges from Long Island, N.Y., to Florida in the south. On the West coast, it's mainly in California, with a few areas around Las Vegas thrown in for good measure.

In these markets, the weakness is not limited to single-family homes, but includes apartment buildings as well. This is especially true in South Florida, where "see-throughs" are ubiquitous.

In the heartland, as well as in the older industrial markets like Detroit, Syracuse and Binghamton, the housing market is fairly steady -- neither strong nor weak. It never bubbled up, so it had little reason to fall.

It's pretty clear that one of the dividing lines between hot and cold is price. High priced units are moving briskly in most parts of the country - whether they are in central cities, or gated communities in the suburbs.

Take New York City, for example. A home in Manhattan has never been more expensive than it is today.

Condos are selling for an average price of $1.5 million, according to several real estate brokers. This reflects apartments ranging from studios to multiple bedrooms.

Indeed, prices of four-bedroom apartments averaged close to $10 million during the second quarter.

Manhattan's real estate market is buoyed by Wall Street money. Hedge fund managers, investment bankers and others who make their living on the Street of Dreams can afford to spend big bucks on their weekday digs.

Speaking of bucks, the shrinking dollar has boosted the buying power of foreigners, who are pouring money into New York City real estate as an investment as well as for a place to live. See my column of July 3.

Another source of demand is from parents of students who are attending many of New York's renowned universities.

Instead of paying rent (which, as you might have guessed, is high), many are opting to buy an apartment for their kids to live in while they are in school, then either use it themselves when their offspring graduate, or sell it at a profit.

The demand for real estate in Manhattan is so strong, it's spilling over into parking spaces. It's not uncommon for a parking spot in a prime location to sell for as much as $250,000.

That's about what you'd pay for an entire house in most parts of the country.

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